The second Eurogroup meeting about Greece happens today, and for the top figure in Europe, German Chancellor Angela Merkel, it comes on the background of state elections at home.
The actual result may matter less, but the fact that they are behind us now (as this was partially behind the tough stance), opens the road for compromises with Greece. Can EUR/USD continue higher?
Her CDU party had the worst defeat in generations in the state elections in Hamburg. The party received only 16% of the votes, clearly outvoted by the center left socialists (SPD). The anti-euro AfD party also made gains and managed to enter the state parliament.
The socialist SPD party won 58 seats and is set to form a coalition with the Green party that won 15 seats. Merkel’s CDU party won only 20 seats, down 8 from the last elections. The anti-euro AfD won 8 seats.
EUR/USD has moved higher last week, riding on USD weakness and despite a standstill at the first Eurogroup meeting on Wednesday.
As the clock ticks towards the end of the current Greek program and with the mutual interest that Greece stays in the euro-zone, a deal could be reached for the debt struck country.
In which way will the compromise go? It seems that Greece has more backwind from the public, with demonstrations in favor of the government in Greece in contrast to a defeat for Merkel.
While the market is not really afraid of a Grexit, a deal that would pout the topic off the agenda would be beneficiary for the common currency.
In addition to Greece, recent economic data has been positive from the euro-zone, especially from Germany.
On Wednesday, we have the FOMC meeting minutes in the US, which could give fresh energy to the US dollar, but in the meantime, a Greek deal could be euro-positive.
More: Where To Target The Squeeze In EUR/USD & Cable? – Goldman Sachs
At the moment, EUR/USD is stable just above 1.14:
In our latest podcast we feature an interview with Dan Blystone and update on Greece
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